TCL Electronics Splashes HK$5.6 Billion to Buy Its Own Air Conditioner Business, With Li Dongsheng and Yuanfeng Capital Securing a 170% Return

TCL Electronics (1070.HK) is set to take full control of TCL's air conditioning business.

On July 15, TCL Electronics announced that it will acquire 100% equity of TCL AeroWell (Cayman) Holdings Limited (hereinafter referred to as "TCL AeroWell") for a total consideration of HK$5.61 billion. Approximately HK$5.443 billion of the consideration will be settled via share issuance, while the remaining HK$167 million will be paid in cash.

The announcement shows that TCL AeroWell indirectly holds 100% equity of Guangdong TCL Air Conditioner Holdings, which in turn owns a 51% stake in TCL Air Conditioner (Zhongshan) Co., Ltd. (hereinafter referred to as "TCL Air Conditioner").

As the core operating entity of TCL's air conditioning business, TCL Air Conditioner will bring TCL Electronics full control over the air conditioning segment once the 51% equity acquisition is completed.

For TCL Electronics, this transaction will further boost its corporate profits. In 2025, TCL AeroWell recorded revenue of approximately HK$33.8 billion, representing a 16% year-on-year increase; its net profit exceeded HK$1.9 billion, up roughly 40% year-on-year.

However, the market's reaction to this deal has been far from positive. On July 16, TCL Electronics' share price opened lower and trended downward for the rest of the trading day, closing down 11.90% at HK$13.48 per share, with its total market capitalization falling to HK$34 billion.

The actual controller of TCL Electronics is the renowned entrepreneur Li Dongsheng. After graduating from university in 1982, Li joined Huizhou TTK Tape Factory (the predecessor of TCL). In the following years, he led TCL to achieve continuous development in the telephone and color TV sectors. By the end of the 1990s, the TCL ecosystem already had two listed companies: TCL Communication (now delisted) and TCL Electronics.

In 2018, Li Dongsheng spearheaded another restructuring of the TCL group. TCL Industries acquired consumer electronics, home appliance and other businesses under TCL Group for RMB 4.76 billion, while the remaining businesses centered on semiconductor operations (including CSOT) and financial investment were reorganized into TCL Technology (000100.SZ).

Currently, Li Dongsheng controls two listed companies, TCL Electronics and TCL Smart Home, through TCL Industries. His controlled entity, Tongli Co., Ltd., has also submitted its registration application to the Shenzhen Stock Exchange.

This time, Li Dongsheng has orchestrated another capital move to inject controlling rights of the TCL air conditioning business into TCL Electronics. Through this transaction, TCL Electronics' business footprint will expand further, while Li Dongsheng, CPE Yuanfeng Capital, and a large group of TCL employees will gain a return of nearly 170%.

Li Dongsheng Secures 170% Return

According to TCL Electronics' announcement, the company will acquire 100% equity of TCL AeroWell from five entities: NXTHome, YF Rongye, Core Elite, Union Vast, and Reach Glory. Their respective shareholdings in TCL AeroWell stand at 31.37%, 28.00%, 17.41%, 16.25%, and 6.96%.

All five entities have notable backgrounds. Among them, NXTHome is indirectly wholly owned by TCL Industries, which is the indirect controlling shareholder of TCL Electronics.

YF Rongye is fully owned by Guangzhou Yuanfeng Rongye, backed by asset management firm CPE Yuanfeng. Liu Lefe, Chairman of Yuanfeng Capital, has long-standing ties with Li Dongsheng and TCL Industries. During the 2019 restructuring of TCL Group and the establishment of TCL Industries, CITIC Industrial Fund was introduced as a shareholder, at which time Liu Lefe served as Chairman and CEO of CITIC Industrial Fund.

Both Core Elite and Union Vast are employee shareholding platforms under the TCL ecosystem. Core Elite is wholly owned by Ningbo Yunjing, an employee shareholding platform for TCL Air Conditioner with over 100 employees holding direct or indirect stakes. Union Vast is fully controlled by Xuliceyu, an employee shareholding platform under TCL Industries Holdings.

Reach Glory is fully owned by Lida Zhihui, a platform controlled by Li Dongsheng with a 62.37% stake.

TCL Electronics will acquire 100% equity of TCL AeroWell from the five aforementioned companies. Specifically, the company will pay HK$103 million in cash to NXTHome and HK$64 million to Union Vast respectively, and settle the remaining consideration via share issuances to all five entities, for a total transaction value of approximately HK$5.61 billion.

The announcement shows that prior to this transaction, T.C.L. Industries (Hong Kong) (the direct controlling shareholder of TCL Electronics) held 54.54% of TCL Electronics' shares, with the remaining 45.46% held by other shareholders. After the transaction is completed, T.C.L. Industries (Hong Kong)'s shareholding will drop to 47.68%, while the five entities NXTHome, YF Rongye, Core Elite, Union Vast, and Reach Glory will hold 3.83%, 3.63%, 2.62%, 1.96%, and 0.90% of the company's shares respectively.

It is worth noting that if this transaction is successfully completed, shareholders of all five aforementioned companies will reap considerable benefits.

Industrial and commercial registration information shows that TCL AeroWell was established in October 2025. Just one month after its founding, the company acquired a 51% stake in TCL Air Conditioner from TCL Industries, with the transaction consideration amounting to approximately RMB 1.8 billion according to the announcement.

By July this year, the five entities including NXTHome injected 100% equity of TCL AeroWell into TCL Electronics for a total consideration of HK$5.61 billion (approximately RMB 4.843 billion). Compared with the RMB 1.8 billion acquisition cost, this transaction delivers a return of nearly 170%.

TCL Electronics Expands Its Business Footprint Again

This acquisition by TCL Electronics is aimed at further expanding the company's business territory.

TCL Electronics is a listed company under the TCL ecosystem focused on the black home appliance sector. It was listed on the Hong Kong Stock Exchange in 1999, with a history spanning 27 years to date.

In recent years, TCL Electronics' operational performance has continued to improve. From 2023 to 2025, the company recorded revenues of HK$78.986 billion, HK$99.322 billion, and HK$114.583 billion respectively; its attributable net profits stood at HK$744 million, HK$1.759 billion, and HK$2.495 billion.

In its recent performance forecast, TCL Electronics projects revenue of HK$60.3 billion to HK$65.7 billion in the first half of this year, representing a 10%-20% year-on-year growth; its adjusted attributable net profit is expected to range between HK$1.48 billion and HK$1.65 billion, up approximately 40%-56% year-on-year.

The continuous improvement of TCL Electronics' performance is closely tied to the steady development of its TV business.

In 2025, TCL Electronics' display business generated revenue of HK$75.797 billion, accounting for 66.2% of its total revenue. To drive the growth of its TV segment, TCL Electronics has been advancing globalization and mid-to-high-end positioning strategies in recent years, which has fueled sustained performance growth. In 2025, large-size TVs accounted for 56.5% of the company's revenue, with large-size TV revenue from international markets making up 41.5% of total TV revenue, becoming the core growth engine of the TV business.

In addition to the TV business, TCL Electronics also operates internet services and innovative businesses including photovoltaic, marketing, and smart home solutions.

Among these segments, the photovoltaic business has seen rapid growth in recent years. In 2025, its revenue rose 63.61% year-on-year to HK$21.063 billion. TCL Electronics' photovoltaic business adopts an asset-light operation model, with core offerings including residential photovoltaic systems and integrated solar-storage-heating energy solutions.

From TCL Electronics' perspective, the acquisition of the air conditioning business will help the company advance its full-category smart terminal layout, thereby enhancing its overall market competitiveness and driving better operational performance.

It is worth noting that this acquisition of the TCL air conditioning business marks the second expansion of TCL Electronics' business footprint within the year.

In January this year, TCL Electronics reached an agreement with Sony to establish a joint venture in which TCL Electronics holds a 51% stake. The joint venture will own the Sony and BRAVIATM brands, and conduct integrated R&D, manufacturing, and other operations for products including televisions and home audio systems on a global scale.

For TCL Electronics, this partnership will help the company access distribution channel resources in Europe and America, enhance brand premium capabilities, and accelerate the high-end transformation of its TV business.

This article is sourced from the WeChat Official Account "Morgan Stanley Finance" (ID: damofinance), authored by Damo Finance, and published with authorization from 36Kr.